Beneficial owners are individuals who directly or indirectly: (1) own or control at least 25% of your company’s ownership interests, or (2) exercise substantial control over your business. Common examples of beneficial owners of a reporting company can include the following:-  An important decision-maker for the reporting company- A senior officer (president, chief executive officer, chief financial officer, general counsel, chief operating officer, or any other officer with a similar function)- An individual with the authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company

Effective Jan. 1, 2024, this is federal legislation created to curb illicit finances and boost transparency around company ownership structures. This helps the government crackdown on financial crimes and fraud, such as money laundering, corruption, human trafficking, drug trafficking, tax fraud, and fraud against employees, customers, and other businesses.

Under this Act, the Beneficial Ownership Information Reporting Rule requires reporting companies to file information on each beneficial owner with the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN). This means reporting companies must identify and document any person who holds a 25% or greater ownership interest or exercises substantial control over the company. Reporting info on beneficial owners supports the ongoing focus and efforts of the U.S. government to deter corporations who would hide or benefit from actions that harm others.

FinCEN has developed a database that holds information about each beneficial owner documented by a reporting company. It’s important to understand this new rule given the severity of criminal and civil penalties for failure to file, which include imprisonment and fines.

Each business is responsible for filing a Beneficial Ownership Information Report (BOIR), which includes the individuals who control or own the business. However, a beneficial owner of a business who willfully fails to follow the reporting requirement and filing rules will face personal liability in the form of both criminal and civil penalties for noncompliance. Failure to comply can lead to criminal penalties of imprisonment for up to two years and/or a fine of up to $10,000, and a civil penalty of up to $500 per day.

It’s critical for reporting companies to file before the deadline to avoid penalties. Existing businesses, or reporting companies created or registered to do business in the U.S. before Jan. 1, 2024, have until Jan. 1, 2025, to file.

Newly created reporting companies, or businesses that formed in 2024, have 90 calendar days from the date of formation to file. This means 90 days from the date of receiving actual or public notice that your business is officially registered.

Even if a reporting company files the report on time, penalties can be imposed if the report does not include the correct information. It is critical that the reporting company’s filing is accurate and includes all the required information about the company, its formation, and its beneficial owners. We can help you ensure accurate filing with a simplified reporting and filing process, satisfying the federal mandate.